Parametric insurance is said to be significantly disrupting and complementing traditional insurance models across the climate industry, by offering innovative solutions that address the shortcomings of conventional approaches.
In the face of climate-related risks, assessing and quantifying damages accurately can be a very challenging task, but through the use of parametric insurance, which utilizes predefined, objective parameters to trigger payouts, the need for lengthy claims assessments is eliminated.
During a recent interview with Reinsurance News, Anuj Kumbhat, Co-Founder & CEO of Weather Risk Management Services (WRMS), an agriculture and climate risk management firm, explained how this move towards parametric insurance is particularly relevant in the climate industry, “where the frequency and severity of weather-related events are on the rise due to climate change.”
He said: “Parametric models allow for quicker and more efficient payouts, enabling businesses and individuals to receive funds rapidly for immediate response and recovery efforts. This is crucial in scenarios like hurricanes, droughts, or floods, where swift financial support is essential.”
